Once again, the word of the quarter was tariffs. The quarter began with the “Liberation Day” announcement on April 2nd, when the administration introduced sweeping new tariffs¹. In response, the S&P 500 fell more than 10% over the next two trading sessions, the largest two-day decline since COVID². Just one week later, however, the index surged 9.5%, marking its third-best day ever³, following news of a 90-day pause on tariff implementation⁴. Stocks continued to climb and ultimately reached a new all-time high by the end of June, completing the fastest recovery for the S&P 500 since 1982⁵.

For the first half of the year, the S&P 500 rose 6.05%, while bonds, as tracked by the Bloomberg Aggregate Bond Index (AGG), returned 4.05%. International equities outperformed, with the Vanguard FTSE All-World ex-US ETF (VEU) gaining 18.3%. U.S. Treasuries, tracked by the iShares GOVT ETF, were essentially flat⁶, while the U.S. dollar suffered its worst start to a year since 1973⁷.

Volatility was a defining feature of the first half. The VIX Index, a widely used measure of market volatility, spiked above 50 in April, levels not seen since the height of the pandemic⁸. Meanwhile, the Trade Policy Uncertainty Index also hit a new all-time high, reflecting growing investor unease over trade dynamics⁹.

Coming into 2025, we maintained the view that recession risk was low, but that volatility would be elevated, largely due to overly optimistic growth expectations. That view is increasingly becoming consensus. Thanks to this foresight, we positioned portfolios for a more turbulent environment, and we’re pleased with how they have performed so far this year.

Economically, while data has continued to soften, particularly in the labor market, it still signals a normalization, not a recession in our opinion. Our base case remains there will be no recession in 2025. What could change our view? A scenario where trade negotiations break down and we settle into a structurally higher tariff regime, which could result in more persistent economic drag.

It’s important to note that no recession does not mean the coast is clear. Economic data remains mixed, valuations are elevated, with the S&P 500 trading near 30x forward earnings¹⁰ and trade policy uncertainty continues to remain elevated. Together, these factors suggest that market volatility may persist in the months ahead.

As always, we encourage clients to stay invested according to their personalized risk speed and maintain a long-term perspective. Avoiding short-term noise remains critical to long-term success.

Sources:
1.https://www.csis.org/analysis/liberation-day-tariffs-explained
2.https://ycharts.com/indices/%5ESPX/chart/#/?…
3.https://www.nasdaq.com/articles/stock-market-just-had-one-its-best-days-ever-heres-what-history-says-comes-next
4.https://www.cnn.com/2025/04/09/business/reciprocal-tariff-pause-trump
5.https://www.nasdaq.com/articles/sp-500-makes-fastest-recovery-1982-5-best-etfs#:~:text=Per%20Bespoke%20Invest…
6.https://ycharts.com/companies/AGG/chart/#/?…
7.https://www.ft.com/content/59c07f63-3331-462b-b9e3-d1bcaea69fce
8.https://ycharts.com/indices/%5EVIX/chart/#/?…
9.https://www.bloomberg.com/news/newsletters/2025-04-01/supply-chain-latest-trade-uncertainty-hits-a-record-high
10.https://www.multpl.com/s-p-500-pe-ratio